Applicable Law

Question 1

How is the separability of the arbitration clause relevant?

Give a case as an example.

Answer 1

If the contract is void, then the law of the contract as regarded by the tribunal may not be the law of the contract as originally provided, but the law of the seat.

Bulbank - parties’ choice of Austrian law replaced by Swedish law.

Question 2

How does French law view the question of applicable law vis-a-vis the contract?

Answer 2

The existence/scope of agreement is determined by the common intentions of the parties. Per Dalico, “the agreement is legally independent of main contract… [its existence and effectiveness] are to be assessed… on the basis of their common intentions.”

Question 3

What are some of the features of the lex arbitri?

Answer 3

1. The required (or recommended) definition and form of agreement to arbitrate.
2. Whether dispute is arbitrable.
3. How the Arbitral tribunal is to be constituted.

Question 4

How may procedural rules bring issues?

Answer 4

1. Arbitral tribunal may in exercise of powers be required to use national law of place of arbitration.
2. Depending on choice of seat, lex arbitri may confer on arbitrators unintended powers.
3. The procedural law may conflict with substantive law - is issue arbitrable?

Question 5

What are three key questions to ask of applicable law?

Answer 5

1. Who or what determines at each point which aspect is governed by which law/set of rules?
2. What is difference between ‘law’ and ‘rules’ in this context?
3. Which law/rules may be preferable or favourable to which party?

Question 6

How does any choice of lex arbitri limit the parties?

Answer 6

A lex arbitri brings with it submission to the laws of that seat, including compliance with mandatory provisions.

Question 7

Where is the award regarded as being ‘made’?

Answer 7

Usually at the seat. This is the case in the ICC.

Question 8

How can universal adoption of the Model Law nonetheless become complicated?

Answer 8

States may vary the provisions of the Model Law. This is especially the case with states that specialise in arbitration.

Question 9

Some states are said to have an enforcement bias, and delocalisation is said to bring about only one source of control, namely that of enforcement. What are the justifications for this process?

Give a case example of an unsuccessful source of law.

Answer 9

1. ICA is sufficiently regulated by its own rules, which either drawn up by parties or arbitrators, with consent from parties.
2. Control should only come from law of place where award is enforced. Delocalisation is only possible where permitted by local law.

Halpern v Halpern - Jewish law said to be unsuitable for arbitration due to lack of supervisory or appellate process.

Question 10

How may delocalisation/the tribunal be undermined?

Answer 10

1. A domestic court may enforce an award annulled by another (Chromalloy).
2. Injunction against arbitral tribunal.

Question 11

How may domestic law be applicable to substance of contract?

Answer 11

1. Changes in law could mean amendments to contract eg currency regulations.
2. Parties may choose type of law: common, civil, socialist.
3. Public policy cannot be evaded eg Soleimany v Soleimany, where award inapplicable with English law: “parties cannot override that concern [for Court’s process] by private agreement.”

Question 12

What types of legal systems may be used?

Answer 12

National law, public international law, concurrent laws, transnational laws (eg lex mercatoria), equity and good conscience.

Question 13

Why is the case of […] important for the issue of judicial support?

Answer 13

According to court in Channel Tunnel v Balfour Beatty, there is no power to order injunction if foreign seat chosen.

Question 14

How might the choice of law be relevant to parties when considering the procedures?

Answer 14

The parties may not want to adopt the seat’s rules of evidence or hearsay.

Question 15

According to LCIA Rules, what happens where rules or law is not chosen by parties?

Answer 15

The Arbitral tribunal will choose based on the law “which it considers appropriate”, meaning they have great discretion.

Question 16

What is the forum conveniens?

Answer 16

The choice of law based on the factor(s) with closest connection to the contract.
Such factors can be the currency, language, nationality or residence of the parties, to which national specifications goods are made, and whether third country is involved.

Question 17

Why is the forum conveniens a potentially contentious issue?

Answer 17

It gives in English law a wide discretion, but not all systems would agree on that scope. Further, the LCIA presumes it to have the English common law meaning, and the International Lawyers’ Association (ILA) Guidelines simply state the choice should be the ‘sensible, not arbitrary’ choice.

Question 18

Why was Shamil Bank v Beximco a contentious decision?

Answer 18

The court held the agreement was to be subject to English law, despite a) the contract stating its terms to be subject to ‘glorious principles of shariah’, and b) the familiarity of both parties with the tenets of Islamic law.

Question 19

Why did the Court refuse to apply shariah law in Shamil Bank?

Answer 19

The court, being secular, did not consider itself competent to judge on religious questions. Furthermore, the great variance of interpretations on shariah law made it difficult to choose the ‘correct’ interpretation. Finally, English law does not permit the operation of more than one legal system on a contract.

Question 20

What are some non-legal rules?

Answer 20

Ex aequo et bono, amiable compositeur, equity and good conscience, lex mercatoria, UNIDROIT rules, trade usage.

Question 21

Why is lex mercatoria contentious? Give a case example.

Answer 21

It is in France believed to be a well-established principle, whereas in English law it is treated at best with great caution. It is often agreed to because it is believed no problem will arise.

In Channel Tunnel, the phrase ‘general principles of international trade law’ was taken by French party to refer to lex mercatoria.

Question 22

Give case example of geographical site of arbitration not being site of lex arbitri.

Answer 22

Braes of Doune Wind Farm - arbitration in Glasgow, yet subject to lex arbitri of English Arbitration Act. This would cover many aspects, such as ‘procedural safeguards’ (eg equal treatment of parties).

Question 23

How is delocalisation theory relevant?

Answer 23

Means that the law is free from the seat. English law however does not recognise a law with no seat. Problems with ascertaining the seat are addressed in the AA, s3 1996.

Question 24

Regarding the law governing the arbitration agreement, how do English and French commentators differ?

Answer 24

English commentators favour the law of the contract as being applicable (because it is part of the contract) whereas the French favour the law of the seat (for convenience). This comes down to a question of personal commercial freedom versus the need for state regulation.

Question 25

What is the significance of C v D [2007] EWCA Civ 1282?

Answer 25

The following:
Regarding the Bermuda form (arbitrations required in London per New York law), only English law could apply. Per LJ Longmore:
it could scarcely be supposed that a party aggrieved by one part of an award could proceed in one jurisdiction and a party aggrieved by another part of an award could proceed in another jurisdiction.

Therefore: a choice of seat for the arbitration must be a choice of forum for remedies seeking to attack the award.

An agreement as to the seat ‘is analogous to an exclusive jurisdiction clause.’
Further: The fact, however, that the 1996 Act allows parties to contract out of its non-mandatory provisions does not mean that the proper law of a contract to refer disputes to arbitration can constitute an “agreement to the contrary” and thus import a method of challenge to the award not permitted
by the seat of the arbitration.

Question 26

What does NYConv say regarding applicable law of award?

Answer 26

“The law to which the parties have subjected it”, or if that fails the seat.

Question 27

If it is not expressly stated what is the choice of law, what does tribunal use?

Answer 27

Implicit/tacit/implied/inferred choice.

Question 28

What is the term for using the forum as source of law?

Answer 28

Qui indicem forum elegit jus: a choice of forum is a choice of law.

Question 29

Why, says RaH, may another country be elected as the source of law?

Answer 29

“A place of arbitration may be chosen for many reasons, unconnected with the law of that place. It may be chosen because of its geographical convenience to the parties; or because it is a suitably neutral venue; or because of the high reputation of the arbitration services to be found there; or for some other, equally valid reason.”

Question 30

What does the Rome Convention say is to be applicable law?

Answer 30

Article 4(1) that, in the absence of an express choice by the parties, ‘the contract shall be governed by the law of the country with which it is most closely connected’.

Question 31

What may a tribunal have to consider?

Answer 31

The conflict of laws rules of the lex fori. To find this out, the relevant conflict rules generally select particular criteria that serve to link or connect the contract in question with a given system of law.

Question 32

Despite earlier comments regarding conflict of laws rules, what did Sapphire case say? What has this given rise to?

Answer 32

“Contrary to a State judge, who is bound to conform to the conflict law rules of the State in whose name he metes out justice, the arbitrator is not bound by such rules. He must look for the common intention of the parties, and use the connecting factors generally used in doctrine and in case law and must disregard national peculiarities.”

This has led to the ‘direct choice’ doctrine, meaning arbitrator can pick and choose as they see fit.

Question 33

What does UNCITRAL, the Model Law and the Washington Convention all attempt to express?

Answer 33

The intention is to make it clear that the arbitral tribunal is entitled to choose the governing law of the contract, in the absence of any express or implied choice of law by the parties themselves.

Question 34

What further power does an arbitrator have?

Answer 34

The tribunal is not obliged to choose a system of law as the substantive law of the contract. It may, instead, choose such rules of law as it considers appropriate for the resolution of the dispute.

Question 35

For what principal reason does Colón say shariah law should be given equal treatment with substantive law of contract?

Answer 35

He says contracts contain in themselves rules which are outside national legislation, yet are applied. He asserts shariah law is just such a set of rules.